Keydata Investments has brought out issue 12 of the extra income plan, an income-producing capital-protected bond that is linked to the performance of the FTSE 100 over a five-year term.
Investors can choose from annual income at 6 per cent gross, quarterly income of 1.41 per cent gross or rolled-up income at 35 per cent gross. The bond will also provide a full capital return provided the index does not fall by more than 30 per cent without recovering to at least its initial value. If the index breaches the safety net and fails to recover, the original capital is reduced by 1 per cent for every 1 per cent fall in the index.
The majority of structured product providers are focusing their efforts on growth products as it is difficult to create income-producing products in the current environment. According to Arete Consulting's Structured Retail Products website, the only other structured product available that focuses entirely on income is Bristol & West's capital secure income bond. However, this does not provide a suitable comparison to the Keydata product as it is linked to a basket of 32 blue-chip stocks listed on the FTSE 100 index and is not available through IFAs.
Other Bristol & West offerings that are available to IFAs, such as the global income and growth guaranteed equity bond provide a mixture of growth and income. However, income is provided through a fixed-rate savings account element, so again it does not provide a direct comparison with the Keydata product.
A lack of similar products shows that there is a gap in the market for this type of product. However, some investors may not feel the level of income on offer is enough to compensate the potential risk of capital erosion, particularly as data from Moneyfacts shows it is possible to get 5.85 per cent interest a year with London Scottish Bank's five year high-interest bond without putting capital at risk.